Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

BOSNIA AND HERZEGOVINA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article XIVYes.
Exchange Measures
Restrictions and/or multiple currency practicesThe staff report for the 2006 Article IV consultation with Bosnia and Herzegovina states that as of September 29, 2006, Bosnia and Herzegovina maintained restrictions arising from measures taken with respect to frozen foreign currency deposits, mainly on the transferability of balances and interest accrued for nonresidents. (Country Report No. 06/371)
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)Yes.
Other security restrictionsIn accordance with the relevant UN Security Council resolutions, restrictions are imposed on certain financial transactions related to listed terrorist groups.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of Bosnia and Herzegovina is the convertible marka.
Other legal tenderEuro banknotes and coins also circulate freely and are used for cash payments.
Exchange rate structureUnitary.
Classification
Currency board arrangementThe convertible marka is pegged to the euro at the rate of KM 1 per €0.51129.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
References to legal instruments and hyperlinksn.a.
Arrangements for Payments and Receipts
Prescription of currency requirements
Controls on the use of domestic currencyControls apply only to prevent money laundering.
Payments arrangementsNo.
Administration of controlCompanies wishing to engage in foreign trade must register with the relevant ministry.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotes
On exports
Domestic currencyYes.
Foreign currencyExports of foreign currency and securities denominated in foreign currency are regulated with specific conditions prescribed by the relevant ministry.
On imports
Domestic currencyYes.
Foreign currencyThere are no restrictions on imports of foreign currency and securities in foreign currency.
References to legal instruments and hyperlinksLaw on the Central Bank of Bosnia and Herzegovina; www.cbbh.ba/en/regulations.html.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyIndividuals and legal entities may hold foreign exchange accounts with commercial banks without restrictions or approvals.
Held abroadYes.
Approval requiredExporters who are legal entities may open accounts, but approval is required from the relevant ministry.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyYes.
References to legal instruments and hyperlinksLaw on Foreign Currency Business Operations in the Federation of Bosnia and Herzegovina; Law on Foreign Currency Business Operations in Republika Srpska; www.fbihvlada.gov.ba/bosanski/zakoni/1998/zakoni/44%20b%20zakon.htm; www.narodnaskupstinars.net/lat/zakoni/zakon.php?id_zakona=201.
Nonresident Accounts
Foreign exchange accounts permittedNonresident persons may open foreign exchange accounts with commercial banks.
Domestic currency accountsNonresidents may open accounts in domestic currency with commercial banks.
Convertible into foreign currencyYes.
Blocked accountsAccounts are blocked in accordance with the law that regulates money laundering and financing of terrorism.
References to legal instruments and hyperlinksLaw on Foreign Currency Business Operations in the Federation of Bosnia and Herzegovina; Law on Foreign Currency Business Operations in Republika Srpska.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsImports must arrive within 90 (or 60) days from the date of the advance payment.
Documentation requirements for release of foreign exchange for importsCommercial banks may require documents verifying the purpose of the transaction before effecting payment.
Import licenses and other nontariff measuresThere are no import quotas for any product. All imports are free from licensing requirements, except those that relate to the protection of public security; the health of people, plants, and animals; articles of artistic or historic value; industrial-commercial property; and the disposal of drugs and scrap.
Positive listYes.
Negative listThere is no official list of prohibited imports, but the Council of Ministers may establish such a list as circumstances require.
Open general licensesYes.
Other nontariff measuresMeasures related to security and public health apply.
Import taxes and/or tariffsImport tariffs range from zero to 15%, with an average unweighted rate of 6%.
State import monopolyNo.
References to legal instruments and hyperlinksLaw on Foreign Trade Policy; www.fipa.gov.ba/FipaFiles/File/Law%20Compendium/lawcompendium_files/(EUTDI)%2017.%20BH%20LAW%20ON%20FOREIGN%20TRADE%20POLICY.pdf.
Exports and Export Proceeds
Repatriation requirementsExport proceeds must be collected and repatriated in full within 60 (or 90) days of the date of exportation. This period may be extended for 60 days with permission from the relevant ministry.
Financing requirementsNo.
Documentation requirementsExporters must be authorized to engage in foreign trade. Customs requires that exporters provide documents accompanying the goods; in some cases, documents verifying the origin of the goods are also required. Approval from the Ministry of Foreign Trade is required for exports of military equipment, blood, narcotics and medicines containing narcotics, and other pharmaceutical products.
Preshipment inspectionYes.
Export licensesExports are free of restrictions except for certain products, such as weapons, drugs, and works of art, for which permits are required.
Export taxesNo.
References to legal instruments and hyperlinksLaw on Foreign Currency Business Operations in the Federation of Bosnia and Herzegovina; Law on Foreign Currency Business Operations in Republika Srpska; Law on Foreign Trade Policy.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsFollowing an agreement with Germany, the Central Bank of Bosnia and Herzegovina will provide documentation to Germany on pensions from Germany that are being paid by commercial banks under German jurisdiction to workers in Bosnia and Herzegovina.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsSecurities market participants must be authorized to trade on the organized markets, in accordance with laws on securities transactions.
Repatriation requirementsNo.
Controls on capital and money market instruments
On capital market securitiesDomestic securities may be purchased and sold domestically only through an authorized domestic participant in the securities market.
Shares or other securities of a participating natureControls apply to all these transactions.
Controls on derivatives and other instrumentsNo.
Controls on credit operations
Financial credits
By residents to nonresidentsFinancial credits by residents to nonresidents are not allowed.
To residents from nonresidentsResidents may obtain financial credits from nonresidents and for that purpose open accounts and hold funds abroad with the submission of a copy of the contract to the relevant ministry.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsPrudential regulations on banks apply.
Controls on direct investment
Inward direct investmentForeign equity ownership is not limited, but in the production of arms, ammunition, explosives for military use, and military equipment, or in the dissemination of public information, investments above 49% must be registered with the relevant ministry.
Controls on liquidation of direct investmentWhen liquidating, outstanding tax balances must be paid.
Controls on real estate transactions
Purchase locally by nonresidentsA reciprocity agreement applies to countries that were part of the former Federal Republic of Yugoslavia. There are no limitations on other nonresidents.
Controls on personal capital transactions
LoansLoans to nonresidents are not allowed.
By residents to nonresidentsYes.
To residents from nonresidentsResident natural persons are required to use financial credits through the authorized domestic banks.
Gifts, endowments, inheritances, and legaciesControls apply to all these transactions.
Transfer of assets
Transfer abroad by emigrantsYes.
Transfer of gambling and prize earningsYes.
References to legal instruments and hyperlinksLaw on Foreign Currency Business Operations in the Federation of Bosnia and Herzegovina; Law on Foreign Currency Business Operations in Republika Srpska; Law on Securities in the Federation of Bosnia and Herzegovina; Law on Securities in Republika Srpska; http://81.93.74.18/enstock/dokumentiInfo.aspx?idkat=3; http://217.199.131.154/uploads/(178%20Kb)%20Zakon%20o%20vrijednosnim%20papirima.pdf.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutionsThe Foreign Exchange Entity Law and the Banking Law regulate these transactions.
Lending to nonresidents (financial or commercial credits)Domestic commercial banks are not allowed to extend such credits.
Purchase of locally issued securities denominated in foreign exchangeThere are no locally issued securities denominated in foreign exchange.
Open foreign exchange position limitsOpen foreign currency position limits allow a ratio of up to 30% between a bank’s open foreign currency position and the amount of its regulatory capital.
Provisions specific to institutional investors
Insurance companies
Limits (max.) on securities issued by nonresidentsn.a.
Limits (max.) on investment portfolio held abroadn.r.
Currency-matching regulations on assets/liabilities compositionn.r.
Pension fundsn.a.
Investment firms and collective investment fundsSecurities of a particular company may not comprise more than 10% of total assets of the investment fund.
Limits (max.) on securities issued by nonresidentsn.a.
Limits (max.) on investment portfolio held abroadn.a.
Limits (min.) on investment portfolio held locallyn.a.
Currency-matching regulations on assets/liabilities compositionn.a.
References to legal instruments and hyperlinksLaw on Foreign Currency Business Operations in the Federation of Bosnia and Herzegovina; Law on Foreign Currency Business Operations in Republika Srpska; Law on Banks in the Federation of Bosnia and Herzegovina; Law on Banks in Republika Srpska; www.fba.ba/en/laws/; www.abrs.ba/propisi/propisi_eng.htm.
Changes during 2006
No significant changes occurred in the exchange and trade system.

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